The Treasury Select Committee heard the first hints he may consider payouts as the Chancellor answered questions, many of them put by members of the public.

A pair called Susan and Jean wanted to know why Equitable policyholders lost out when bank deposits were guaranteed up to £50,000.

Darling said: 'I understand the position of anyone who has entered into an arrangement and it turns out to be different from what they thought ... I hope that we can respond to Susan, Jean and many, many others shortly.'

More than a million policyholders were affected after Equitable came close to collapse in 2000.

Ros Altmann, a former government adviser on pensions, said: 'Given they have bailed out Icelandic bank customers 100 per cent, I can't see how they can justify not compensating Equitable customers.'